We continue to see the EUR/USD guided by concerns over COVID-19. This has led to increased risk aversion.
Looking at the EUR/USD daily chart above, we see an ongoing attempt to test the strong sentiment and technical region of 1.16. The currency pair has fallen from 1.18 over the previous week with no bullish days. The momentum is significant. Having said so, it faces the collective will of 1.16 and the lower bollinger band. Based on our decade of forex observations, we find bollinger bands to be rather useful in terms of our analysis and it is likely that it is currently exerting upside pressure against the bearish dip.
If the support of 1.16 fails, we may see further weakness stemming from the long term desires to push the EUR/USD back below 1.14. Any return of bullish pressure will likely see the middle bollinger band and 1.18 giving resistance.
The US dollar strengthened against many currencies last week. Despite this, the price of gold was only slightly affected and this suggests that demand is high. As of publication, the gold price is rising. The S&P 500 closed the previous week in the red and this suggests apprehension. These various market signals are indicative of risk aversion and the decrease of risk appetite. Concerns over the COVID-19 resurgence continue as countries consider various degrees of lockdown. British Prime Minister Boris Johnson announced a new month-long lockdown for England on Saturday.
It is important to ascertain the ongoing sentiment of the market. If the risk aversion recedes, we may see a reversal of the current price action. Therefore it is important for us to continue monitoring the news media and economic reports.
The US-Non Farm Payroll is due this Friday and many will be analyzing the numbers closely as employment is a fundamental component of the economy. It leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy. The US NFP is released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:
– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees
Therefore if there is any unexpected development, price volatility may increase.
If you like our signature knowledge-based approach to forex trading, consider becoming a premium member. At less than $0.20 cents a day, our methodology goes beyond just having you copy trades and signals. We will guide and provide you with the tools required for you to analyze the market and trade in forex. Our signature knowledge-based approach will help you understand the markets better, developing a skill of your own. Invest in yourself. Click on members now.